“Kobada is a project that we negotiated in 2005 and closed in 2006. In 2008, we had a very significant change take place in our strategy that was essentially due to the arrival of Pierre Lalande, who is a geologist with some 40-odd years experience, a good percentage of that spent in the West African theatre. Pierre is the former chief geologist of IAMGOLD from, I believe, 1994 through to 2001, so he has a lot of experience in Mali. As Pierre tells us the story when he first contacted us, he tried to buy Kobada in 1998 from the French—it was formerly a parastatal organization of the French government, the BRGM—and he couldn’t make a deal with them that made any economic sense so they took a pass on it. But he’d never forgotten about it and, more important, about what he perceived its potential was. So he was very keenly following our progress from a distance and felt the urge to give us a call and offer his services. Which we agreed to.

“Since then, Pierre has caused us to re-evaluate our programs and shift our focus from deep drilling and sulphides to surface drilling in oxide material. He postulated the notion that the gold within the oxide profile can be completely recovered with a gravity plant alone. That has enormous implications for capital expenditures and even operating costs.

“Last year, our drill program was completely concentrated in the oxide profile, which is the first 100 vertical metres of the deposit that has been completely weathered out. Hence its lending itself to utilizing gravity, and gravity alone, as a recovery process. Last year our program consisted of infill drilling and step-out drilling. But the bulk of the holes were infill. We had to do that because the historical drilling was not enough to bring it into a 43-101 resource. So we had to tighten up the drill spacing and drill density, follow the consultant’s recommendation and infill drill. Of course, the market really is not excited about infill drilling. But we did have some step-out holes as well.

I have no doubt in my mind that the project is going into production. – Mike Nikiforuk

“Having said that, now we are stepping-out. In the 2011 program there are a couple of things that we want to impress upon the market place. 1) 100% of our work this year is step-out drilling. 2) The current resource that contains 740,000 ounces gold at a 0.3 g/t cut-off, averaging 1.25 g/t, is contained within 1,100 metres of strike; the drilling we press released today—the 14 holes to the south—stepped-out as far as 200 metres to the south. So we’ve grown the mineralized envelope 200 metres to the south.

“Perhaps of even greater importance, we put a press release out April 7 announcing 27 holes that were drilled in four clusters up to two kilometres north of the mineralized envelope that contains the 43-101 resource, and we intercepted economic grade over mineable width in each one of those clusters. Therefore, we’re saying today that the mineralized strike length of Zone 1 has grown from 1,100 to 3,300 metres—in essence, a 300% increase. If you look at today’s holes, 90% of them ended in mineralization. So we still have our depth potential. And we believe the sulphide material will be amenable to utilizing gravity as a recovery process as well—but we will have to introduce crushing and grinding circuits because we’ll be dealing with competent bedrock, as opposed to weathered, oxidized material.

“So, for the first time in our corporate history in a press release, we tried to bring light to the fact that the 2011 program—which we’ve drilled approximately 200 holes to date on, and we’re still drilling—that the goal is to bring visibility to the next one million ounces, or the two million ounce gold threshold, as an interim target. The only reason in the world we state that is because we are absolutely certain that we are at the one-million-ounce threshold, and we are going to the two million ounce threshold with this year’s program. That is not to say that we will be able to bring that into the 43-101 category this year—for that we’ll have to infill drill. But it’s there.

“We’re going to be coming out with a scoping study in the next short while. That scoping study is going to incorporate all drilling up to December 2010. So we’ll complete this drill program and evaluate where we’re at. We’ve actually contacted our drill provider and requested a second rig, running double shifts, commencing January 2012. The scoping study—a preliminary economic assessment—will be in our hands very shortly. It’s going to contain the recommendations to move the project through feasibility. This year our goal was to bring visibility to where the next million ounces are situated. We hope to be through feasibility approximately 18 months from now. That’ll incorporate infill drilling to bring those ounces into the resource; that’ll incorporate further step-out exploration drilling; it will also entail geotechnical drilling. That way, we’ll know precisely what our pit’s going to look like, our slopes, where infrastructure is going to go. We’re also going to do some condemnation drilling as part of that exercise.

“Internally, we have envisioned that Kobada will be in production within three years from today. It’ll take 12 months to put it into production from the date of having access to the capital and making the decision to move forward. The plant that we’re looking at will run 10,000 tonnes per day. And we are looking at capital expenditure that will not exceed $125 million. That should spin in the magnitude of 130,000 ounces gold production a year. Those are our internally stated goals.

“Our goal is to put Kobada into production. One of the things that’s on our agenda that’s of very high importance is to identify a CEO who has a track record and pedigree within the investing community as a result of prior success. One who has the engineering background and technical skills to lead the team and move it forward to become a producer. Having said that, we are also fully anticipating that current producers may make an offer to acquire the asset. It is our job—as a management team, it is incumbent upon us—to evaluate any offer and present it to the shareholders for a decision. It’s a two-pronged approach: yes, we are going to be driving it forward and, in the absence of a proposal, putting it into production. And it’ll be a very low-cost producer. The capex for a gravity plant is a fraction of what it is for agitation leaching. The preliminary numbers I’ve seen so far in terms of internal rate of return are very, very strong.”

“I have no doubt in my mind that the project is going into production. I have no doubt in my mind that, ultimately, the PEA is going to arrive on our desk demonstrating positive economics and advising to push the project forward. We’ve had preliminary discussions with potential bankers and we believe that the project will qualify for 60% debt facility. I emphasize that these are very preliminary discussions, but the project is attracting interest both in the investment community, the banking community and the mining community.”